SECURITY AGREEMENT
EXHIBIT
10.2
1.
THE
SECURITY. The undersigned SPORT CHALET, INC., a Delaware corporation, (the
“Pledgor”)
hereby
assigns and grants to BANK OF AMERICA, N.A. (the “Bank”)
a
security interest in the following described property now owned or hereafter
acquired by the Pledgor, wherever located (“Collateral”):
(a)
All
accounts, contract rights, chattel paper, instruments, deposit accounts,
letter
of credit rights, payment intangibles and general intangibles, including
all
amounts due to the Pledgor from a factor; rights to payment of money from
the
Bank under any Swap Contract (as defined in Paragraph 2 below); and all returned
or repossessed goods which, on sale or lease, resulted in an account or chattel
paper.
(b)
All
inventory, including all materials, work in process and finished
goods.
(c)
All
machinery, furniture, fixtures and other equipment of every type now owned
or
hereafter acquired by the Pledgor, (including, but not limited to, the equipment
described in the attached Equipment Description, if any).
(d)
All
of the Pledgor’s deposit accounts with the Bank. The Collateral shall include
any renewals or rollovers of the deposit accounts, any successor accounts,
and
any general intangibles and choses in action arising therefrom or related
thereto.
(e)
All
instruments, notes, chattel paper, documents, certificates of deposit,
securities and investment property of every type. The Collateral shall include
all liens, security agreements, leases and other contracts securing or otherwise
relating to the foregoing.
(f)
All
general intangibles, including, but not limited to, (i) all patents, and
all
unpatented or unpatentable inventions; (ii) all trademarks, service marks,
and
trade names; (iii) all copyrights and literary rights; (iv) all computer
software programs; (v) all mask works of semiconductor chip products; (vi)
all
trade secrets, proprietary information, customer lists, manufacturing,
engineering and production plans, drawings, specifications, processes and
systems. The Collateral shall include all good will connected with or symbolized
by any of such general intangibles; all contract rights, documents,
applications, licenses, materials and other matters related to such general
intangibles; all tangible property embodying or incorporating any such general
intangibles; and all chattel paper and instruments relating to such general
intangibles.
(g)
All
negotiable and nonnegotiable documents of title covering any
Collateral.
(h)
All
accessions, attachments and other additions to the Collateral, and all tools,
parts and equipment used in connection with the Collateral.
(i)
All
substitutes or replacements for any Collateral, all cash or non-cash proceeds,
product, rents and profits of any Collateral, all income, benefits and property
receivable on account of the Collateral, all rights under warranties and
insurance contracts, letters of credit, guaranties or other supporting
obligations covering the Collateral, and any causes of action relating to
the
Collateral.
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(j)
All
books and records pertaining to any Collateral, including but not limited
to any
computer-readable memory and any computer hardware or software necessary
to
process such memory (“Books
and Records”).
2.
THE
INDEBTEDNESS. The Collateral secures and will secure all Indebtedness of
the
Pledgor to the Bank. Each party obligated under any Indebtedness is referred
to
in this Agreement as a “Debtor”.
“Indebtedness”
means
all debts, obligations or liabilities now or hereafter existing, absolute
or
contingent of the Debtor or any one or more of them to the Bank, whether
voluntary or involuntary, whether due or not due, or whether incurred directly
or indirectly or acquired by the Bank by assignment or otherwise. Indebtedness
shall include, without limitation, all obligations of the Debtor arising
under
any Swap Contract. “Swap
Contract”
means
any interest rate, credit, commodity or equity swap, cap, floor, collar,
forward
foreign exchange transaction, currency swap, cross currency rate swap, currency
option, securities puts, calls, collars, options or forwards or any combination
of, or option with respect to, these or similar transactions now or hereafter
entered into between the Debtor and the Bank.
3.
PLEDGOR’S COVENANTS. The Pledgor represents, covenants and warrants that
unless
compliance is waived by the Bank in writing:
(a)
The
Pledgor will properly preserve the Collateral; defend the Collateral against
any
adverse claims and demands; and keep accurate Books and Records.
(b)
The
Pledgor resides (if the Pledgor is an individual), or the Pledgor’s chief
executive office (if the Pledgor is not an individual) is located, in the
state
specified on the signature page hereof. In addition, the Pledgor (if not
an
individual or other unregistered entity), is incorporated in or organized
under
the laws of the state specified on such signature page. The Pledgor shall
give
the Bank at least thirty (30) days notice before changing its residence or
its
chief executive office or state of incorporation or organization. The Pledgor
will notify the Bank in writing prior to any change in the location of any
Collateral, including the Books and Records.
(c)
The
Pledgor will notify the Bank in writing prior to any change in the Pledgor’s
name, identity or business structure.
(d)
Unless otherwise agreed, the Pledgor has not granted and will not grant any
security interest in any of the Collateral except to the Bank, and will keep
the
Collateral free of all liens, claims, security interests and encumbrances
of any
kind or nature except the security interest of the Bank.
(e)
The
Pledgor will promptly notify the Bank in writing of any event which affects
the
value of the Collateral, the ability of the Pledgor or the Bank to dispose
of
the Collateral, or the rights and remedies of the Bank in relation thereto,
including, but not limited to, the levy of any legal process against any
Collateral and the adoption of any marketing order, arrangement or procedure
affecting the Collateral, whether governmental or otherwise.
(f)
The
Pledgor shall pay all costs necessary to preserve, defend, enforce and collect
the Collateral, including but not limited to taxes, assessments, insurance
premiums, repairs, rent, storage costs and expenses of sales, and any costs
to
perfect the Bank’s security interest (collectively, the “Collateral
Costs”).
Without waiving the Pledgor’s default for failure to make any such payment, the
Bank at its option may pay any such Collateral Costs, and discharge encumbrances
on the Collateral, and such Collateral Costs payments shall be a part of
the
Indebtedness and bear interest at the rate set out in the Indebtedness. The
Pledgor agrees to reimburse the Bank on demand for any Collateral Costs so
incurred.
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(g)
Until
the Bank exercises its rights to make collection, the Pledgor will diligently
collect all Collateral.
(h)
If
any Collateral is or becomes the subject of any registration certificate,
certificate of deposit or negotiable document of title, including any warehouse
receipt or xxxx of lading, the Pledgor shall immediately deliver such document
to the Bank, together with any necessary endorsements.
(i)
The
Pledgor will not sell, lease, agree to sell or lease, or otherwise dispose
of
any Collateral except with the prior written consent of the Bank; provided,
however, that the Pledgor may (x) sell inventory in the ordinary course of
business and (y) sell or otherwise dispose of equipment that, in the aggregate
during any 12 month period, has a fair market or book value (whichever is
more)
of $500,000 or less.
(j)
The
Pledgor will maintain and keep in force insurance covering the Collateral
against fire and extended coverages, to the extent that any Collateral is
of a
type which can be so insured. Such insurance shall require losses to be paid
on
a replacement cost basis, be issued by insurance companies acceptable to
the
Bank and include a loss payable endorsement in favor of the Bank in a form
acceptable to the Bank. Upon the request of the Bank, the Pledgor will deliver
to the bank a copy of each insurance policy, or, if permitted by the Bank,
a
certificate of insurance listing all insurance in force.
(k)
The
Pledgor will not attach any Collateral to any real property or fixture in
a
manner which might cause such Collateral to become a part thereof unless
the
Pledgor first obtains the written consent of any owner, holder of any lien
on
the real property or fixture, or other person having an interest in such
property to the removal by the Bank of the Collateral from such real property
or
fixture. Such written consent shall be in form and substance acceptable to
the
Bank and shall provide that the Bank has no liability to such owner, holder
of
any lien, or any other person.
(n)
Exhibit A to this Agreement is a complete list of all patents, trademark
and
service xxxx registrations, copyright registrations, mask work registrations,
and all applications therefor, in which the Pledgor has any right, title,
or
interest, throughout the world.
To the
extent required by the Bank in its discretion, the
Pledgor
will promptly notify the Bank of any acquisition (by adoption and use, purchase,
license or otherwise) of any patent, trademark or service xxxx registration,
copyright registration, mask work registration, and applications therefor,
and
unregistered trademarks and service marks and copyrights, throughout the
world,
which are granted or filed or acquired after the date hereof or which are
not
listed on the Exhibit.
The
Pledgor
authorizes the Bank, without notice to the Pledgor, to modify this Agreement
by
amending the Exhibit to include any such Collateral.
(o)
The
Pledgor will, at its expense, diligently prosecute all patent, trademark
or
service xxxx or copyright applications pending on or after the date hereof,
will
maintain in effect all issued patents and will renew all trademark and service
xxxx registrations, including payment of any and all maintenance and renewal
fees relating thereto, except for such patents, service marks and trademarks
that are being sold, donated or abandoned by the Pledgor pursuant to the
terms
of its intellectual property management program.
The
Pledgor
also will promptly make application on any patentable but unpatented inventions,
registerable but unregistered trademarks and service marks, and copyrightable
but uncopyrighted works.
The
Pledgor
will at its expense protect and defend all rights in the Collateral against
any
material claims and demands of all persons other than the Bank and will,
at its
expense, enforce all rights in the Collateral against any and all infringers
of
the Collateral where such infringement would materially impair the value
or use
of the Collateral to the Pledgor or the Bank.
The
Pledgor
will not license or transfer any of the Collateral, except for such licenses
as
are customary in the ordinary course of the Pledgor’s business, or except with
the Bank’s prior written consent.
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4.
ADDITIONAL OPTIONAL REQUIREMENTS.
The
Pledgor
agrees that the Bank may
at
its option at any time, whether or not the Pledgor is in default:
(a)
Require the Pledgor to deliver to the Bank (i) copies of or extracts from
the
Books and Records, and (ii) information on any contracts or other matters
affecting the Collateral.
(b)
Examine the Collateral, including the Books and Records, and make copies
of or
extracts from the Books and Records, and for such purposes enter at any
reasonable time upon the property where any Collateral or any Books and Records
are located.
(c)
Require the Pledgor to deliver to the Bank any instruments, chattel paper
or
letters of credit which are part of the Collateral, and to assign to the
Bank
the proceeds of any such letters of credit.
(d)
Notify any account debtors, any buyers of the Collateral, or any other persons
of the Bank’s interest in the Collateral.
5.
DEFAULTS. Any one or more of the following shall be a default
hereunder:
(a)
Any
Indebtedness is not paid when due, or any default occurs under any agreement
relating to the Indebtedness, after giving effect to any applicable grace
or
cure periods.
(b)
The
Pledgor
breaches any term, provision, warranty or representation under this Agreement
or
under any other obligation of the Pledgor to the Bank, and such breach remains
uncured after any applicable cure period.
(c)
The
Bank fails to have an enforceable first lien (except for any prior liens
to
which the Bank has consented in writing) on or security interest in the
Collateral.
(d)
Any
custodian, receiver or trustee is appointed to take possession, custody or
control of all or a substantial portion of the property of the Pledgor or
of any
guarantor or other party obligated under any Indebtedness.
(e)
The
Pledgor
or any guarantor or other party obligated under any Indebtedness becomes
insolvent, or is generally not paying or admits in writing its inability
to pay
its debts as they become due, fails in business, makes a general assignment
for
the benefit of creditors, dies, or commences any case, proceeding or other
action under any bankruptcy or other law for the relief of, or relating to,
debtors.
(f)
Any
case, proceeding or other action is commenced against the Pledgor or any
guarantor or other party obligated under any Indebtedness under any bankruptcy
or other law for the relief of, or relating to, debtors.
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(g)
Any
involuntary lien of any kind or character attaches to any Collateral, except
for
liens for taxes not yet due.
(h)
The
Pledgor has given the Bank any false or misleading information or
representations.
6.
BANK’S
REMEDIES AFTER DEFAULT. In the event of any default, the Bank may do any
one or
more of the following:
(a)
Declare any Indebtedness immediately due and payable, without notice or
demand.
(b)
Enforce the security interest given hereunder pursuant to the Uniform Commercial
Code and any other applicable law.
(c)
Enforce the security interest of the Bank in any deposit account of the Pledgor
maintained with the Bank by applying such account to the
Indebtedness.
(d)
Require the Pledgor to obtain the Bank’s prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any Collateral
consisting of inventory.
(e)
Require the Pledgor to segregate all collections and proceeds of the Collateral
so that they are capable of identification and deliver daily such collections
and proceeds to the Bank in kind.
(f)
Require the Pledgor to direct all account debtors to forward all payments
and
proceeds of the Collateral to a post office box under the Bank’s exclusive
control.
(g)
Require the Pledgor to assemble the Collateral, including the Books and Records,
and make them available to the Bank at a place designated by the
Bank.
(h)
Enter
upon the property where any Collateral, including any Books and Records,
are
located and take possession of such Collateral and such Books and Records,
and
use such property (including any buildings and facilities) and any of the
Pledgor’s equipment, if the Bank deems such use necessary or advisable in order
to take possession of, hold, preserve, process, assemble, prepare for sale
or
lease, market for sale or lease, sell or lease, or otherwise dispose of,
any
Collateral.
(i)
Demand and collect any payments on and proceeds of the Collateral. In connection
therewith the Pledgor irrevocably authorizes the Bank to endorse or sign
the
Pledgor’s name on all checks, drafts, collections, receipts and other documents,
and to take possession of and open the mail addressed to the Pledgor and
remove
therefrom any payments and proceeds of the Collateral.
(j)
Grant
extensions and compromise or settle claims with respect to the Collateral
for
less than face value, all without prior notice to the Pledgor.
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(k)
Use
or transfer any of the Pledgor’s rights and interests in any Intellectual
Property now owned or hereafter acquired by the Pledgor, if the Bank deems
such
use or transfer necessary or advisable in order to take possession of, hold,
preserve, process, assemble, prepare for sale or lease, market for sale or
lease, sell or lease, or otherwise dispose of, any Collateral.
The
Pledgor
agrees that any such use or transfer shall be without any additional
consideration to the Pledgor. As used in this paragraph, “Intellectual
Property”
includes, but is not limited to, all trade secrets, computer software, service
marks, trademarks, trade names, trade styles, copyrights, patents, applications
for any of the foregoing, customer lists, working drawings, instructional
manuals, and rights in processes for technical manufacturing, packaging and
labeling, in which the Pledgor has any right or interest, whether by ownership,
license, contract or otherwise.
(l)
Have
a receiver appointed by any court of competent jurisdiction to take possession
of the Collateral.
The
Pledgor
hereby consents to the appointment of such a receiver and agrees not to oppose
any such appointment.
(m)
Take
such measures as the Bank may deem necessary or advisable to take possession
of,
hold, preserve, process, assemble, insure, prepare for sale or lease, market
for
sale or lease, sell or lease, or otherwise dispose of, any Collateral, and
the
Pledgor hereby irrevocably constitutes and appoints the Bank as the Pledgor’s
attorney-in-fact to perform all acts and execute all documents in connection
therewith.
(n)
Without notice or demand to the Pledgor, set off and apply against any and
all
of the Indebtedness any and all deposits (general or special, time or demand,
provisional or final) and any other indebtedness, at any time held or owing
by
the Bank or any of the Bank’s agents or affiliates to or for the credit of the
account of the Pledgor or any guarantor or endorser of the Pledgor’s
Indebtedness.
(o)
Exercise any other remedies available to the Bank at law or in
equity.
7.
Dispute
Resolution Provision.
This
paragraph, including the subparagraphs below, is referred to as the
“Dispute
Resolution Provision”.
This
Dispute Resolution Provision is a material inducement for the parties entering
into this agreement.
(a)
This
Dispute Resolution Provision concerns the resolution of any controversies
or
claims between the parties, whether arising in contract, tort or by statute,
including but not limited to controversies or claims that arise out of or
relate
to: (i) this agreement (including any renewals, extensions or modifications);
or
(ii) any document related to this agreement (collectively a “Claim”).
For
the purposes of this Dispute Resolution Provision only, the term “parties” shall
include any parent corporation, subsidiary or affiliate of the Bank involved
in
the servicing, management or administration of any obligation described or
evidenced by this agreement.
(b)
At
the request of any party to this agreement, any Claim shall be resolved by
binding arbitration in accordance with the Federal Arbitration Act (Title
9,
U.S. Code) (the “Act”).
The
Act will apply even though this agreement provides that it is governed by
the
law of a specified state.
(c)
Arbitration proceedings will be determined in accordance with the Act, the
then-current rules and procedures for the arbitration of financial services
disputes of the American Arbitration Association or any successor thereof
(“AAA”),
and
the terms of this Dispute Resolution Provision. In the event of any
inconsistency, the terms of this Dispute Resolution Provision shall control.
If
AAA is unwilling or unable to (i) serve as the provider of arbitration or
(ii)
enforce any provision of this arbitration clause, the Bank may designate
another
arbitration organization with similar procedures to serve as the provider
of
arbitration.
6
(d)
The
arbitration shall be administered by AAA and conducted, unless otherwise
required by law, in any U.S. state where real or tangible personal property
collateral for this credit is located or if there is no such collateral,
in the
state specified in the governing law section of this agreement. All Claims
shall
be determined by one arbitrator; however, if Claims exceed Five Million Dollars
($5,000,000), upon the request of any party, the Claims shall be decided
by
three arbitrators. All arbitration hearings shall commence within ninety
(90)
days of the demand for arbitration and close within ninety (90) days of
commencement and the award of the arbitrator(s) shall be issued within thirty
(30) days of the close of the hearing. However, the arbitrator(s), upon a
showing of good cause, may extend the commencement of the hearing for up
to an
additional sixty (60) days. The arbitrator(s) shall provide a concise written
statement of reasons for the award. The arbitration award may be submitted
to
any court having jurisdiction to be confirmed and have judgment entered and
enforced.
(e)
The
arbitrator(s) will give effect to statutes of limitation in determining any
Claim and may dismiss the arbitration on the basis that the Claim is barred.
For
purposes of the application of any statutes of limitation, the service on
AAA
under applicable AAA rules of a notice of Claim is the equivalent of the
filing
of a lawsuit. Any dispute concerning this arbitration provision or whether
a
Claim is arbitrable shall be determined by the arbitrator(s), except as set
forth at subparagraph (j) of this Dispute Resolution Provision. The
arbitrator(s) shall have the power to award legal fees pursuant to the terms
of
this agreement.
(f)
The
procedure described above will not apply if the Claim, at the time of the
proposed submission to arbitration, arises from or relates to an obligation
to
the Bank secured by real property. In this case, all of the parties to this
agreement must consent to submission of the Claim to arbitration.
(g)
To
the extent any Claims are not arbitrated, to the extent permitted by law
the
Claims shall be resolved in court by a judge without a jury, except any Claims
which are brought in California state court shall be determined by judicial
reference as described below.
(h)
Any
Claim which is not arbitrated and which is brought in California state court
will be resolved by a general reference to a referee (or a panel of referees)
as
provided in California Code of Civil Procedure Section 638. The referee (or
presiding referee of the panel) shall be a retired Judge or Justice. The
referee
(or panel of referees) shall be selected by mutual written agreement of the
parties. If the parties do not agree, the referee shall be selected by the
Presiding Judge of the Court (or his or her representative) as provided in
California Code of Civil Procedure Section 638 and the following related
sections. The referee shall determine all issues in accordance with existing
California law and the California rules of evidence and civil procedure.
The
referee shall be empowered to enter equitable as well as legal relief, provide
all temporary or provisional remedies, enter equitable orders that will be
binding on the parties and rule on any motion which would be authorized in
a
trial, including without limitation motions for summary judgment or summary
adjudication . The award that results from the decision of the referee(s)
will
be entered as a judgment in the court that appointed the referee, in accordance
with the provisions of California Code of Civil Procedure Sections 644(a)
and
645. The parties reserve the right to seek appellate review of any judgment
or
order, including but not limited to, orders pertaining to class certification,
to the same extent permitted in a court of law.
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(i)
This
Dispute Resolution Provision does not limit the right of any party to: (i)
exercise self-help remedies, such as but not limited to, setoff; (ii) initiate
judicial or non-judicial foreclosure against any real or personal property
collateral; (iii) exercise any judicial or power of sale rights, or (iv)
act in
a court of law to obtain an interim remedy, such as but not limited to,
injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies. The filing of a court action is not
intended to constitute a waiver of the right of any party, including the
suing
party, thereafter to require submittal of the Claim to arbitration or judicial
reference.
(j)
Any
arbitration, judicial reference or trial by a judge of any Claim will take
place
on an individual basis without resort to any form of class or representative
action (the “Class
Action Waiver”).
Regardless of anything else in this Dispute Resolution Provision, the validity
and effect of the Class Action Waiver may be determined only by a court or
referee and not by an arbitrator. The parties to this Agreement acknowledge
that
the Class Action Waiver is material and essential to the arbitration of any
disputes between the parties and is nonseverable from the agreement to arbitrate
Claims. If the Class Action Waiver is limited, voided or found unenforceable,
then the parties’ agreement to arbitrate shall be null and void with respect to
such proceeding, subject to the right to appeal the limitation or invalidation
of the Class Action Waiver. The
Parties acknowledge and agree that under no circumstances will a class action
be
arbitrated.
(k)
By
agreeing to binding arbitration or judicial reference, the parties irrevocably
and voluntarily waive any right they may have to a trial by jury as permitted
by
law in respect of any Claim. Furthermore, without intending in any way to
limit
this Dispute Resolution Provision, to the extent any Claim is not arbitrated
or
submitted to judicial reference, the parties irrevocably and voluntarily
waive
any right they may have to a trial by jury to the extent permitted by law
in
respect of such Claim. This waiver of jury trial shall remain in effect even
if
the Class Action Waiver is limited, voided or found unenforceable. WHETHER
THE CLAIM IS DECIDED BY ARBITRATION, BY JUDICIAL REFERENCE, OR BY TRIAL BY
A
JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT
IS
THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED
BY
LAW.
8.
MISCELLANEOUS.
(a)
Any
waiver, express or implied, of any provision hereunder and any delay or failure
by the Bank to enforce any provision shall not preclude the Bank from enforcing
any such provision thereafter.
(b)
The
Pledgor
shall, at the request of the Bank, execute such other agreements, documents,
instruments, or financing statements in connection with this Agreement as
the
Bank may reasonably deem necessary.
(c)
All
notes, security agreements, subordination agreements and other documents
executed by the Pledgor or furnished to the Bank in connection with this
Agreement must be in form and substance satisfactory to the Bank.
(d)
This
Agreement shall be governed by and construed according to the laws of the
State
of California, to the jurisdiction of which the parties hereto
submit.
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Dated:
August 31, 2007.
| BANK OF AMERICA, N.A. | SPORT CHALET, INC. |
| By: \s\ Xxxxxxx Xxxxxx | By:\s\ Xxxxxx Xxxxxxxx |
| Name: Xxxxxxx Xxxxxx | Name: Xxxxxx Xxxxxxxx |
| Title: Senior Vice President | Title: Executive Vice President - Finance, |
|
Chief
Financial Officer
|
|
| Address where notices to | Address where notices to |
| the Bank are to be sent: | the Borrower are to be sent: |
| Bank of America, N.A. |
Sport
Chalet, Inc.
|
| 000 X. Xxxx Xxxxxx, Xxxxx 0000 | One Sport Chalet Drive |
| Los Angeles, CA 90071 | Xx Xxxxxx, Xxxxxxxxxx 00000 |
| Attn: Xxxxxxx Xxxxxx | Attention: Xxxxxx Xxxxxxxx |
| Facsimile: (000) 000-0000 | Telephone: (000) 000-0000 |
| Facsimile: (000) 000-0000 | |
Pledgor’s
state of incorporation: DELAWARE
9
